TMI Blog2021 (12) TMI 431X X X X Extracts X X X X X X X X Extracts X X X X ..... e third respondent. As regards the allegation of violating the fundamental rights, etc, it is the categorical stand of the respondents that on the basis of credible information, summons were issued to the petitioners and the same were followed by search of their premises. The petitioners were neither arrested nor taken into custody by the respondents. Therefore, the question of infringement of their rights under any provision of law, will not arise - The Supreme Court in C.Sampath Kumar v. Enforcement Officer [1997 (9) TMI 458 - SUPREME COURT] , while deciding the case in respect of Section 40 of the FERA, held that when a person is summoned and examined under Section 40, it cannot be presumed that a statement will be obtained under pressure or duress and such a statement obtained does not infringe the constitutional guarantee of protection against self-incrimination under Article 20(3) of the Constitution. Therefore, the concept of applying the theory of self-incrimination even at the stage of investigation in case of violation of FEMA Act cannot be raised to the level of an investigation of a criminal offence protected by Articles 20(3) and 21 of the Constitution. It is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WP No. 20224 of 2021, Mr. Muralikumaran for Mr. E. Balamurugan in WP No. 20330 of 2021, Mrs. Narmadha Sampath in WP No. 20356 of 2021 For the Respondents : Mr. N. Ramesh, Special Public Prosecutor for Enforcement Directorate in all the Writ Petitions COMMON ORDER These three analogous writ petitions have been filed under Article 226 of the Constitution of India and the issues involved are similar in nature. Hence, it is convenient to dispose of them by this common order. These petitions would, however, be referred to as first, second and third writ petitions. 2.1. The first writ petition viz., WP No. 20224 of 2021 has been filed praying to issue a Writ of (i)Declaration to declare the entire search operation held in the premises of the petitioner on 02.09.2021 and 03.09.2021 as null and void being violative of Article 21 of The Constitution of India and further declare all statements recorded on 02.09.2021 and 03.09.2021 as null and void; (ii)Mandamus directing the respondents not to cause any physical, mental or verbal harassment to the petitioner during the pendency of investigation relating to the proceedings in File No.T-3/CEZO-1/24/2021 dated 03.09.2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Enforcement Directorate, entered into the house of the petitioners in the first and third writ petitions reportedly to carry out a search under Section 37 of the Foreign Exchange Management Act, 1999 (in short, 'The FEMA Act'). Immediately upon entering the house, they snatched the mobile phones of the inmates and asked the children of the petitioners to log off their online classes and handover the laptops to them, as a result of which, the children could not attend the classes on-line for two days nor they were allowed to be sent to their grandmother's place. The search went on for 36 hours, during the course of which, the petitioner in the first writ petition was harassed, humiliated and made to comply with the taunts of the officials of the Enforcement Directorate. Such horrific events, according to the petitioners, unfolded in front of their children and family members, which has caused permanent scar in the lives of all the family members. Even a request made by the petitioner in the first writ petition to spare his wife, who is suffering from osteoporosis and who has nothing to do with the affairs of the company, has not been heeded to and she was not allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r copies of the statements recorded, it was declined by the officers. In the Panchanama, it was recorded as if the statement of the petitioner was obtained voluntarily without any threat, coercion or inducement, which is factually incorrect. The petitioner has retracted his signed statements typed out by the officers on 02.09.2021 and 03.09.2021 and he is ready to establish that those statements were obtained out of coercion. He was left in a huge mental agony and fear caused by the unprecedented manner in which he was treated by the officials under the guise of investigation. Notwithstanding the search held on 02.09.2021 and 03.09.2021, the petitioner was also directed to appear for enquiry on 14.09.2021. Therefore, he is before this court with this writ petition viz., WP.No.20224 of 2021. 5. The averments made in the second and third writ petitions are verbatim the same as those contained in the first writ petition with respect to the manner in which the search was conducted and the petitioners were treated by the officials and the constant threat and intimidation exercised on them. Thus, according to the petitioners, the statements of the petitioners were obtained by threat a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Technology Pvt.Ltd and M/s.G.I Retail Pvt.Ltd; the petitioner along with his family members is holding the majority shares in Hermes i-tickets Pvt Ltd. through GI Retail Private Limited; in his capacity as director of GI Retail Pvt.Ltd, the shares owned by the minority shareholders in Hermes i-tickets Pvt.Ltd were purchased vide share agreement dated 09.09.2015 and thereby, he and his family members became 100% owners of Hermes i-tickets Pvt.Ltd; the shares of Hermes i-ticket Pvt.Ltd. were subsequently, sold to Emerging Markets Investment Fund IA (EMIF 1A) a company incorporated in Mauritius through share agreements dated 25.03.2015, 21.05.2015, 07.09.2021 and 16.09.2021 by the petitioner in his capacity as Director of GI Retail Pvt Ltd. for a paltry sum; immediately within few days of the completion of sale of shares of Hermes i-tickets Pvt.Ltd to EMIF 1A, Mauritius by the petitioner and his brother, EMIF 1A, Mauritius has invested EUR 1,000,000/- (Euro one million) in M/s.GI Technology Pvt. Ltd, through subscription agreement dated 24.09.2015; thereafter, within a few weeks of acquisition of Hermes i-tickets Pvt Ltd. by EMIF 1A, Mauritius, the said shares were sold by EMIF 1A, Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of companies under the provisions of the FEMA, Act and as such, he is not entitled to the relief as claimed. 7.1.4. It is specifically pointed out in the counter affidavit that the department did not receive any letter correspondence officially seeking copies of the petitioners' statements dated 02.09.2021 and 03.09.2021. However, the statements whatever deposed by the petitioner were recorded and have been shown to him and the same had been read by the petitioner and were duly signed by him. Therefore, the allegation of violating the principles of natural justice and fundamental rights, is not sustainable. It is further submitted that during the entire search procedure dated 02.09.2021 and 03.09.2021, the officials had maintained requisite dignity and decorum, not amounting to any kind of humiliation or violation of the human rights and fundamental rights as guaranteed to the petitioner under the Constitution of India. The respondent department thus exercised their duties and powers in a fair manner as conferred under the provisions of FEMA Act and other relevant laws. 7.2. Similar averments have been made by the same respondents in the counter affidavit filed in the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11.10.2021. The said summons dated 05.10.2021 were sent through mail and addressed to his premises located in Mylapore, Royapettah and Namakkal, which were let out for rent. Further, the mother-in-law of the petitioner viz., Namagiri, was also issued with summons dated 05.10.2021 for her appearance on 25.10.2021. According to the learned counsel, the summons dated 05.10.2021 were issued to the in-laws of the petitioner knowing fully well that they are not the residents of India and their NRO accounts were frozen by the respondents with the sole intention to harass the petitioner. Therefore, the learned counsel sought for declaration, declaring the search and seizure actions resorted to by the respondents as invalid and ultra vires the Constitution of India. 8.1.4. The learned counsel appearing for the petitioner also submitted that the power of the respondents to investigate into the matter, does not confer any right to harass the petitioner and at the stage of enquiry, the petitioner cannot be treated as accused and inflicted with mental and physical injury. It is further submitted that the fundamental right provided to the petitioner under Articles 20 and 22 of the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberately causing damage or injury to the plaintiff, granted an interim order in their favour, which order was not challenged before the supreme court, till date. The learned counsel further submitted that the officials failed to divulge the status of the complaint nor the case pending before them; the petitioner apprehends that he may be implicated in a false case and subjected to hardship, such as, freezing, arrest, etc.; and already the respondent department has frozen the lockers of the petitioner's wife, wherein her seethanam jewels alone are there. Therefore, the learned counsel sought to quash the summons issued against the petitioner, call for the materials collected during the search on 02.09.2021 and 03.09.2021 and expunge the same and treat him in a fair manner as envisaged under the FEMA Act. 8.3. That apart, the learned counsel for the petitioner in the third writ petition submitted that the petitioner is the wife of the petitioner in the first writ petition and her husband was treated as accused in the criminal case and was subjected to ill-treatment and harassment in front of their family members, which would cause damage to his personal as well as professi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 28 of the Act alone shall be deemed to be judicial proceedings under Sections 193 and 228 of the Indian Penal Code, whereas, in the instant case, the respondents have invoked Section 37 of the FEMA Act, which explicitly cannot be construed as a judicial proceedings. As such, the prayer of the petitioner in the first writ petition to have the assistance of a lawyer during the course of investigation cannot be countenanced. According to the learned counsel, the FEMA Act has not chosen to apply the concept of summons used either under the Code of Civil procedure or under the Code of Criminal Procedure, but has chosen to apply analogous provisions found in the Income Tax Act and therefore, assistance of a lawyer of the choice of the petitioner cannot be permitted. In this context, the learned Special Public Prosecutor placed reliance on the decisions of the Supreme Court in Suborno Bose v. Enforcement Directorate and another [(2020) (2) MLJ 646] ; and Poolpandi and others v. Superintendent, Central Excise and others [ CDJ 1992 SC 149] and this court in P.Giribabu and another v. The Deputy Director of Enforcement, Directorate of Enforcement, Chennai [CDJ 2010 MHC 2832] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osecutor appearing for the respondents and also perused the materials available on record. 11.1. At the outset, it needs to be noted that the FEMA Act, which is a legislation for regulating the economic aspect, has been passed to consolidate and maintain law relating to foreign exchange, external trade and payments and for promoting orderly development of foreign exchange. Concededly, the petitioners have knocked the doors of this court by filing these writ petitions, against the proceedings initiated under section 37 of the FEMA Act and consequential action of investigation conducted by the third respondent. Therefore, it would be more appropriate to reproduce section 37 of the FEMA Act, which reads as under:- ''37. Power of search, seizure, etc. - (1) the Director of Enforcement and other officers of Enforcement, not below the rank of an Assistant Director, shall take up for investigation the contravention referred to in section 13. (2) Without prejudice to the provisions of sub-section (1), the Central Government may also, by notification, authorise any officer or class of officers in the Central Government, State Government or the Reserve Bank, not below the ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor or Deputy Director shall not- (a)impound any books of account or other documents without recording his reasons for so doing, or (b)retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Chief Commissioner or Director General or Commissioner or Director therefor, as the case may be. 12.1. It is the principal grievance of the petitioners in all the three writ petitions that during the search operations on 02.09.2021 and 03.09.2021, the officials of the Enforcement Directorate obtained statements from the petitioners under threat and coercion; and such copies of statements recorded from them, were not furnished to the petitioners. The panchnama was silent about the visit of the third respondent and his officers, which creates suspicion about the motive behind the entire search operations and the same does not depict the true picture of the activities that had taken place at that time. The illtreatment meted out by the family of the petitioners more particularly petitioners, is in total violation of Article 21 of the constitution of India. The officials of the Enforcement Directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Act, 2002. 13. Section 50 of the said Act reads as follows:- ................ 14. The above said provisions of law make it clear that powers are conferred on the authorities to summon persons whose attendance is necessary to give evidence or produce any record during the course of investigation or proceedings and such persons, so summoned have to appear before the officer and to state the truth of the subject of the summons. Such authority is also empowered to impound records. Therefore, there is no quarrel about the competency and power conferred on such authority to summon a person and enquiry. Sub-section 4 of Section 50 specifically indicates that every proceedings under sub-section 4 of section 50 specifically indicates that every proceedings under subsections 2 and 3 shall be deemed to be a judicial proceedings within the meaning of Section 193 and 228 of the Indian Penal Code. Therefore, it is apparent that summoning a person and enquiring him under Section 50 of the said Act is in the nature of a judicial proceedings, within the meaning of Section 193 and 228 of the Indian Penal Code. 15. .......... 16. Perusal of Explanation 2 to Section 193 IPC would clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search, as null and void, besides seeking a direction to the first respondent to transfer the investigation from the third respondent to any other officer. Whereas the petitioners in the second and third writ petitions sought to quash the proceedings initiated under section 37 of the FEMA Act and direct the third respondent to produce the entire material evidence pertaining to the said proceedings, expunge the same and treat the petitioners in a fair manner as envisaged under the FEMA Act. 13.1. Repudiating the averments made in these writ petitions, it is the stand of the respondents that though the petitioner in the first writ petition appeared on three occasions before the third respondent and rendered his statements, he was very evasive and non-cooperative and failed to furnish true facts and relevant documents pertaining to sale of shares of Hermes i-tickets Pvt Ltd to EMIF 1A. Stoutly denying the allegations raised by the petitioners that their statements were recorded by exercising coercion and undue influence, it is stated that the petitioners and their family members were treated in a dignified and humanitarian manner and neither the petitioners no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forfeiture provided as punishment for the violation of criminal or penal laws. In the same judgment, the Court has also taken note of the decision in M/s. Gujarat Travancore Agency, Cochin vs. Commissioner of Income Tax, Kerala, Erunakulam, (1989) 3 SCC 52, which had opined that the intention of the legislature such as the one under consideration is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although element of coercion is present is the penalty. In Securities and Exchange Board of India vs. Cabot International Capital Corporation, (2005) 123 Comp Cases 841 Bom) , the Court delineated principles as follows:- 47. Thus, the following extracted principles are summarised; (A) Mens rea is an essential or sine quo non for criminal offence (B) A straitjacket formula of mens rea cannot be blindly followed in each and every case. The scheme of a particular statute may be diluted in a given case. (C) If, from the scheme, object and words used in the statute, it appears that the proceedings for imposition of the penalty are adjudicatory in nature, in contradistinction to criminal or quasi-criminal proceedings, the determination is of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus:- 34. The Tribunal has erroneously relied on the judgment in Hindustan Steel Limited vs. State of Orissa (1969) 2 SCC 627 which pertained to criminal/quasi-criminal proceedings. That Section 25 of the Orissa Sales Tax Act, which was in question in the said case, imposed a punishment of imprisonment upto six months and fine for the offences under the Act. The said case has no application in the present case, which relates to imposition of civil liabilities under the SEBI Act and the Regulations and is not a criminal/quasi criminal proceedings. 13.3.1. With regard to the claim of the petitioners for presence of the Advocate during investigation, the respondents denied the same, relying on the decision in Poolpandi (supra) , in which, the supreme court held as follows: 11. We do not find any force in the arguments of Mr.Salve and Mr.Lalit that if a person is called away from his own house and questioned in the atmosphere of the customs office without the assistance of his lawyer or his friends his constitutional right under Article 21 is violated. The argument proceeds thus: if the person who is used to certain comforts and convenience is asked to come by himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of the respondents to have their lawyer during their interrogation. 13.3.2. This court in P.Giribabu (supra), was of the opinion that the relief sought for by the petitioners seeking permission to be accompanied by an advocate of his choice when he appears before the respondent in pursuant of the summons issued under Section 37 of The Foreign Exchange Management Act, 1999 (FEMA) and recording of statement in the presence of an Advocate who will be present beyond the hearing distance, does not require any consideration . 13.4. As regards the allegation of violating the fundamental rights, etc, it is the categorical stand of the respondents that on the basis of credible information, summons were issued to the petitioners and the same were followed by search of their premises. The petitioners were neither arrested nor taken into custody by the respondents. Therefore, the question of infringement of their rights under any provision of law, will not arise. The decision of the Supreme Court in Justice K.S. Puttaswamy (Retired) (supra), will come to aid the said stand. The relevant portion of the said decision is extracted below: .........A power of search and seizure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... importance to be given to the material seized is a matter of appraisal and merits and not a question to be examined and answered in these writ petitions.......... 13.6. Ultimately, the learned Special Public Prosecutor appearing for the respondents submitted that the petitioners have not rendered their cooperation to the respondent authorities and they were evasive; one of the petitioners made an attempt to flee away, which was thwarted by the respondent authorities; and they have done transactions with the foreign company involving several crores of rupees in contravention of the provisions of the FEMA Act. Therefore, according to the respondents, the petitioners are not entitled for any relief and these writ petitions are liable to be dismissed. 14.1. There cannot be any dispute that the Enforcement Directorate has power to issue summons under Section 37, if it is satisfied that the purpose has relevance to the issue in which the summons was issued. Such power given to them under Section 37 is the same as that of an Income Tax Officer under the Income Tax Act in terms of Section 131 and the same is available to deal with the discovery of materials in contravention of forei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1947 (Act No.XXX of 1947). It was pointed out that while in the proceedings under Act No.XXX of 1947, the assessee would be entitled only to get copies of that portion of the materials, which were brought on record and which were going to be used against him, the portion of the material which was in his favour and which had not been brought on record may not be available to him. In contrast, it was observed that there was fullest right of inspection under ordinary law and the Civil Procedure Code available to an assessee in order to meet the case made against him. We cannot assume that the ITO is not likely to act in accordance with law and give directions to him. Therefore, the apprehension of the Federation at this stage appears to be absolutely misconceived. 15. In the context of what has been indicated above, this court is now required to examine the issues involved herein. Though the petitioner in the first writ petition has at the first instance stated in the affidavit that he has not challenged the summons issued under section 37 of FEMA Act, he differently couched the prayer to declare the search operations pursuant to the summons issued and the statements obtained fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Enforcement Officer [(1997) 8 SCC 358] , while deciding the case in respect of Section 40 of the FERA, held that when a person is summoned and examined under Section 40, it cannot be presumed that a statement will be obtained under pressure or duress and such a statement obtained does not infringe the constitutional guarantee of protection against self-incrimination under Article 20(3) of the Constitution. Therefore, the concept of applying the theory of self-incrimination even at the stage of investigation in case of violation of FEMA Act cannot be raised to the level of an investigation of a criminal offence protected by Articles 20(3) and 21 of the Constitution. 18. In T.T.V.Dinakaran -vs- Enforcement Officer, Enforcement Directorate [1995 (80) ELT 745 (Mad)] , the attempt to challenge the summons served under section 40 was repelled by this Court. In paragraph 11, it was stated as follows:- 11. .'.... ... Moreover, if the summons is taken into consideration it is stated therein that the petitioner's attendance is necessary to give evidence and/or to produce documents in an investigation being made by the respondent under the FERA Act. So far as the documents me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities and that, recording of statement in the presence of advocate is not allowed. Above all, this court is of the view that when the third respondent and his officers are discharging their functions and duties in accordance with the powers conferred under the FEMA Act, the same cannot be questioned by the petitioners on the grounds raised herein. At the same time, it cannot be lost sight that a person who is summoned to appear before the Enforcement Directorate, is not an accused of the criminal case and hence, he/she should be treated in a dignified and humanitarian manner; and the authorities should act strictly as per the provisions of the relevant statute. 20. As mentioned earlier, based on the credible information received, the respondent authorities initiated the proceedings under the provisions of the FEMA Act against the petitioners for the alleged foreign transactions done by them involving several crores of rupees. Pursuant to the same, summons were issued under section 37 of the FEMA Act to the petitioners, calling upon them to appear for preliminary enquiry and for submission of documents mentioned in the schedule thereunder. Consequently, search was cond ..... X X X X Extracts X X X X X X X X Extracts X X X X
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